Three ways to value a stock: nominal, accounting, and market

What is the nominal value of a share? This question may seem simple, but behind it lie three completely different valuation methods that every investor must master. In this ultimate guide, we break down the differences between nominal value, book value, and market value, when to apply each one, and why many investors confuse these concepts.

The starting point: Where does each value come from?

Before investing one euro, you need to know where the number on your screen comes from. And here is the key: each valuation method uses radically different sources.

The nominal value is the simplest. You take the company’s share capital and divide it by the total number of shares issued. End of story. For example, if BUBETA S.A. has a share capital of €6,500,000 and issued 500,000 shares at its IPO, the nominal value will be €13 per share. Simple math.

The book value is more sophisticated. Here, you subtract liabilities from assets and divide the result by the number of shares issued. The company MOYOTO S.A., with assets of €7,500,000, liabilities of €2,410,000, and 580,000 shares outstanding, would have a net book value of €8.775 per share. This number tells you what the company is worth according to its accounting books.

Market value is what really matters every day. You divide the market capitalization by the number of shares. OCSOB S.A., with a market cap of €6.940 billion and 3,020,000 shares, trades at €2.298 per share. This is the actual price at which you buy or sell.

Do you notice the difference? Nominal value is fixed from the start, book value reflects what the balance sheet says, but market value changes every second based on supply and demand.

What each one really tells you

Here’s the important part: it’s not just about numbers, but about what information you extract from each.

The nominal value is a relic of the past. It makes some sense in fixed income because bonds have maturity dates. But in stocks, which have no expiration date, this value is barely useful. Its only utility is as a historical reference or in special cases like convertible bonds, where it sets the future conversion price.

The book value reveals undervalued or overvalued companies. If the stock trades below its book value, it might be cheap. If it trades well above, it may be overvalued. Value investors (like Warren Buffett) live by this analysis. But here’s the trap: this method miserably fails with tech companies and small caps because their most valuable assets are intangible and not properly reflected on the books.

Market value is pure reality. It doesn’t tell you if it’s expensive or cheap, only at what price it’s bought and sold right now. The market has already discounted all expectations, fears, and hopes about that stock. To know if it’s expensive or cheap, you need other indicators like the P/E ratio or serious fundamental analysis.

How to actually use them in your investments

Each value has its moment and place.

You’ll hardly use the nominal value. Except if you invest in convertible bonds, where that reference “nominal” is important for future share exchanges.

The book value is your compass in value investing. Want to compare two gas companies in the IBEX 35 and don’t know which to choose? Calculate the Price/Book ratio (P/VC) for both. If ENAGAS has a P/VC lower than NATURGY, then ENAGAS is cheaper relative to its book value. That doesn’t mean it’s the best investment, but it’s a strong initial filter. The smart move is to add several ratios before deciding.

Market value is your daily tool. Want to buy META PLATFORMS after a sharp drop? The price closes at $113.02. You think it might fall further tomorrow, so you set a limit buy order at $109.00. If the market drops enough during the next session, your order executes. If it bounces back, it doesn’t. The market never sleeps, but it does have hours: Spain and Europe trade from 09:00 to 17:30, US from 15:30 to 22:00, Japan from 02:00 to 08:00, and China from 03:30 to 09:30 Spanish time.

The traps of each method

Nothing is perfect in finance.

The nominal value is almost useless today. It was relevant in the past, but in modern equities it has little analytical value. It’s a historical number, nothing more.

The book value lies more often than you think. Creative accounting (meaning legal tricks in the numbers) can distort the real value. Also, in tech companies or small caps with many intangible assets, the book value is a fantasy. Software worth millions doesn’t appear on the balance sheet the same way a factory does.

Market value is unpredictable by nature. It depends on a million factors that have nothing to do with the company: interest rate announcements, sector news, changes in the global economy, investment trends, collective euphoria. The market overinterprets data constantly and is driven by emotions. A stock can spike due to irrational hype in its sector, or fall without any fundamental reason.

The quick reference table

Conclusion: Don’t confuse the map with the territory

What is the nominal value of a share? It’s just the starting point, nothing more. The important thing is to understand that these three values answer different questions.

If you want to determine if a company is cheap, use the book value along with other fundamental analyses. If you want to trade, use the market value. If you need a historical reference, there’s the nominal value.

The most common mistake is to believe that one of these methods is the “absolute truth.” It’s not. Smart investing requires combining multiple perspectives, understanding the context, and knowing when to apply each tool. The nominal value, book value, and market value are three different lenses on the same reality. Use them together and you’ll see more clearly.